Joint Costs

Joint costs are costs incurred in the production of two or more inseparable products from the same raw material or input. Joint costs stop at the split-off point where the products become separable; after that, the costs are called separable costs. The accounting treatment of joint costs depends on the character and value of the resulting products.

1. . Joint products have relatively high values, and common costs must be allocated by some arbitrary means.
2. Scrap has little or no value, and any disposal cost adds to joint costs. Joint costs are often allocated using net realizable values at the split-off point.